Luxury Brands Are Wrong to Ignore Africa

With growth slowing in key markets like China, luxury brands should examine the numbers, overcome their fears about image and turn their attention to Africa, argues Johanna Collins-Wood.

Pharell for Louis Vuitton

LONDON, United Kingdom — Earlier this year, Nigeria became Africa’s largest economy and the 26th largest economy in the world overnight, valued at $509 billion, based on GDP figures that were recalculated using a base year of 2010 instead of 1990.

(Afritorial editor’s commentary: Please note that the news was received with scepticism by many Nigerians, and Africans in general, who believe that with a vast array of intractable social problems such as power, poverty, illiteracy, infrastructural deficits, corruption, unemployment, insecurity, etc, the country has a way to go before resting on its economic laurels. That said …)

Given Nigeria’s new status, as well as its new crop of millionaires and billionaires, who have become wealthy through oil (Nigeria is the 11th largest oil-producing nation in the world), Nollywood entertainment and other business ventures, one might assume that major luxury good companies would turn their attention towards Nigeria, as well as other emerging markets in Africa, as an important source of opportunity. That, however, is not the case.

Despite rushing to every other inhabited continent in the world, luxury retailers have steadfastly limited their investment in Africa. Louis Vuitton has only four stores on the entire continent, two each in Morocco and South Africa. Gucci has only one store in Morocco and two in South Africa. This stands in stark contrast to other emerging markets, like Latin America, for example, where most of the world’s well-known luxury goods companies have established a strong retail presence.

Without doubt, opening stores in Africa presents brands with significant logistical challenges. But the two primary arguments often given against wider expansion into the African market are 1) people who live in Africa are, overall, too poor to purchase luxury goods and 2) wealth in African countries such as Nigeria was acquired under questionable circumstances and brands could suffer a reputation problem if they were viewed as ignoring this. In a column earlier this year for TheFinancial Times,Vanessa Friedmanhighlighted both opinions, first quoting “the CEO of an enormously successful international accessory brand that will remain nameless,” who says he chose not to move into the Nigerian market because he “didn’t feel comfortable with where a lot of the money was coming from.” Friedman went on say that the decision by many luxury goods companies not to move into Nigeria and other parts of Africa was “in some ways, a question of image.”

What she does not say is that the “image” of Africa that many luxury goods companies appear to harbour is one of poor, struggling nations with poor, struggling people whose only method of obtaining wealth is to lie, cheat and steal. And luxury good companies do not want their carefully crafted brands associated with such a place. Readers may form their own opinion as to whether there is also a touch of racism at work here.

But whatever the reason for this poor image of Africa, it is, at best, simply incorrect. It is true that more than 60 percent of Nigeria’s population is thought to live in severe poverty. However, Nigeria also has more billionaires than any other African country. Lagos, the Nigerian capital, is Africa’s largest city and is home to a burgeoning wealthy class. With the Chinese market beginning to decelerate and Asian customers becoming more selective in the luxury goods they buy, retailers should be examining all their options for expansion. And, considering the industry’s skill in creating the desire for its products in every other continent, it is almost certain they could do the same in Nigeria and other parts of Africa.

The other argument for not moving into the African market — that money in Africa is acquired through illicit means — is simply ridiculous. Luxury good companies have never cared how customers acquired the money used to purchase their products. If they did, they would have to turn away significant numbers of customers from markets such as China and Russia.

The key consumer base for luxury goods has long since left Europe, moving West to the United States, but also East to the Gulf States and Asia, and South to Latin America, particularly Brazil. However, growth in China, the world’s largest consumer of luxury goods, is beginning to slow and there are concerns that the luxury market there is already becoming saturated. Brazil has been successful, but in order to maintain the exclusivity of their brands, luxury good companies may not expand much beyond the first-tier cities of São Paulo and Rio de Janeiro.

Luxury brands must anticipate the growth opportunities of the future and consider where to expand next. To wilfully ignore the business potential of the entire continent of Africa shows poor business judgment.

Johanna Collins-Wood is an American writer and lawyer based in London.

Via The Business of Fashion. Please note that the views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.